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Why China's massive steel lay offs will not hurt economy-The 19th China (Guangzhou) Int’l Spring Industry Exhibition
11/28/2017 Spring Industry Exhibition-Spring expo |
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Xinhua reported that like many other overstaffed steel producers in China, Magang (Group) Holding, or Masteel, is in the middle of downsizing. The steel complex in East China''s Anhui Province made more than 4,000 workers, or 10% of total staff, redundant last year as it cut nearly 5 million metric tonnes of capacity. Of the redundancies, half were older employees opting for early retirement, and over 40 percent were retrained and remployed for new positions in the factory.
The settlement, despite adding to corporate costs, has paid off. Thanks to slimmer operation and stronger competitiveness in advantageous products, Masteel''s Shanghai-listed branch posted a net profit of 2.74 billion yuan (USD 425 million) in the first three quarters, more than double from a year ago.
Masteel is typical of enterprises in glutted steel and coal sectors where the government is pushing for consolidation.
China plans to eliminate 100 million to 150 million tons of crude steel capacity in five years from 2016, and 500 million tons of coal. After the process around 1.8 million employees will no longer be needed, official data shows. Concerns have lingered on whether this wave of industrial restructuring will be similar to those in state-owned enterprises in the 1990s and result in a surge in the jobless rate, and even trigger social and economic instability.
Mr Liu Yanbin former president of the Chinese Academy of Labour and Social Security, a government think tank said that "The placement of those laid-off is usually a thorny issue in resource-based cities and monotowns where the group of unemployed is huge and job vacancies are scarce.”
Analysts believe the impact of capacity cuts on unemployment and the social welfare burden is limited.
Under the last SOE reforms around two decades ago, it was estimated that tens of millions of workers were dismissed within a couple of years, a significant shake-up given that China''s urban workforce only totaled 190 million in 1995.
Mr Tang Jianwei, chief macro analyst with the Bank of Communications said that "With the present economic size and fiscal strength, China can handle the problem more easily. Not only does GDP amount to nearly USD 12 trillion, from less than 1 trillion dollars around 20 years earlier, but the national income per capita has risen to 8,800 dollars from 1,000 dollars."
Rather than simply shutting down factories, the government is now encouraging market approaches, such as mergers and acquisitions and targeted removal of outdated capacity.
Thanks to the strategy, the lay-offs from steel and coal sectors accounted for a much smaller fraction of the working population.
Mr Tang said that "The expected 1.8-million unemployed was merely 0.4% of the country''s 410 million urban workforce.”
During the first 10 months of the year, nearly 12 million jobs were created, surpassing the annual goal and bringing the jobless rate to its lowest level since 2008.
Mr Steven Zhang, chief economist with Morgan Stanley Huaxin Securities said that "Given the robust job increases, the spare labor force can be quickly absorbed by other industries.”
With employment high on its work agenda, the government has stepped up efforts to help redundant workers, with measures ranging from skill training to financial support.
-The 19th China (Guangzhou) Int’l Spring
Industry Exhibition
-Spring Industry Exhibition, spring expo,
2018 Spring exhibition, 2018 Spring expo, China Spring exhibition, China Spring
expo, steel spring exhibition, steel spring expo
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